“When I bought, there was no doubt that short leases were taboo, but it gave me the flexibility I needed.”More asked his personal finance adviser, John Crabtree of Blevins Franks (020-7324 0000), about borrowing money for such a short lease and discovered they were one of the first companies to specialise in this field. Buying a short lease enabled us to buy a property we would otherwise not have been able to afford,” he says. This can then be lent on a traditional 25-year repayment mortgage. Charles More, a businessman who needs to live in central London, chose to buy a five-bedroom family house in Kensington four years ago that only had a 15-year lease.”We needed to stay in this area because of work and because of the children. “The lender will look at the value of the property at the end of the term,” says Boulger. At the end of that term, the borrower will be expected to extend the lease or enfranchise, for which he or she will want to borrow more money.

“If we have someone buying this sort of property, providing it is in central London, there are lenders who will be comfortable in the knowledge that the purchaser is likely to want to enfranchise and know what they are doing.”Criteria for borrowing on a short lease will include not being able to borrow on a high loan percentage and, for very short leases, be on a five- or six-year, interest-only mortgage. “The recent enfranchisement act has been helpful in that it means more people are interested in buying short lease properties,” says Ray Boulger of the brokers, John Charcol (020-7550 6749). Although the mainstream lenders are still unlikely to lend on a short lease, more knowledgeable lenders, such as the Royal Bank or Bank of Scotland and National Westminster in central London, will understand this sort of loan. It suits a lot of people who want to split their investment over two or three years.” The agent recently sold a house in Lennox Gardens to an Italian. “Resistance to buying a short lease has passed away by the year, as it has got easier and easier to enfranchise or extend the lease. And the most impact has been on the best estates or gardens squares, such as Cadogan Gardens, Lennox Gardens, Eaton Square or Egerton Gardens, where the values of properties with long leases have risen.”In Lennox Gardens, for example, where the short leases are down to less than 13 years, these are now appreciating with the market rather than their value ticking away as the years decrease.

At that time, a short lease was a depreciating asset and you certainly would have had difficulty in finding a mortgage. Ten years ago, anyone thinking about buying a property in London with a short lease would have been considered very brave – or quite mad, as there was no security that the lease would be renewed. Valuing is not an exact science, but unlike the estate agent who is pitching for a job when he comes up with a price, the valuer is interested only in comparable evidence, what the property would have sold for on the date he saw it and what similar properties sold for in the last few months. The difficulties arise when you have a property in the countryside and you are not going to find anything comparable that has sold in the last five years. In that case, the valuation becomes more subjective.”Among the range of surveys, the most popular is the middle-range homebuyer’s report, although in the case where a purchaser is not paying for their own survey, the lender will probably share the valuation.

But some banks have a policy of non-disclosure, so it is possible that anyone borrowing a small amount may never find out that their purchase has been given a much lower value than the price they are paying. If prices really did take a tumble, could this be another avenue for legal action?. Ruaraidh Adams-Cairns, head of residential valuations at FDPSavills, recalls the human and financial cost as being huge. After banks had crystallised their losses they launched a raft of litigation against surveyors, valuers and lawyers, accusing them of negligence and in many cases fraud. Since then, and mindful of undervaluing when prices are on the way up and overvaluing when on the way down, the institution has tightened up the valuation process.”Valuers do come under enormous pressure from the banks and the buyers, and can have their ears chewed off by both sides. A spokesman for the institution said that in a cooling market they have to price realistically if they want to sell: “Astute buyers realise there is scope for negotiation and are putting in bids to reflect that.”But for those who might criticise surveyors for being over-cautious, it is worth remembering that they were sued in large numbers after the recession of 1989-1993. In another example, a London buyer found that his £435,000 purchase was valued at only £295,000, eventually negotiating a price in the middle but still more than a 10 per cent reduction.The crux here is that although he gained from the down valuation, that was only because he did not need to borrow a large amount.